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Bitcoin Miners Face Downturn as Cryptocurrency Retreats After It Temporarily Reaches $49,000

2024.01.12

 

Key Takeaways

  • Major Bitcoin mining stocks experience significant losses amid cryptocurrency volatility.
  • The sector braces for impact ahead of the Bitcoin halving event in April.

Mining Stocks React to Market Fluctuations

Bitcoin miners experienced a downturn in the stock market on Thursday, reversing earlier gains. This shift came as the price of Bitcoin saw volatile trading after the U.S. Securities and Exchange Commission approved the first U.S. spot bitcoin exchange-traded funds. Leading mining companies Marathon Digital and Riot Platforms suffered significant losses, dropping 12% and 15% respectively. Other prominent players like Iris Energy and CleanSpark also faced declines, with stock prices falling by 6% and 7%.

Bitcoin Price Volatility Affects Mining Sector

The retreat in mining stocks was in part a reaction to profit-taking by investors, following Bitcoin’s brief surge above $49,000 – a peak not seen since December 2021. However, the price of Bitcoin has since retraced to about $46,000, influencing the mining sector’s performance. In 2023, miners were among the biggest gainers in the stock market, with Marathon Digital and Riot Platforms seeing substantial growth of 590% and 350% respectively, and CleanSpark and Iris Energy both posting gains of over 400%.

Miner Revenue Impacted by Transaction Fee Trends

Recent weeks have seen a decrease in miner revenue, correlating with a dip in Bitcoin transaction fees. According to CryptoQuant data, high fees in December, driven by increased transaction activity on the network, have subsided, impacting the revenue streams of mining companies. Julio Moreno of CryptoQuant highlighted these trends, explaining the direct effect of transaction fee fluctuations on miners’ financial health.

Preparing for the Bitcoin Halving

Investors in the mining sector are also anticipating the upcoming Bitcoin halving, a significant event in the cryptocurrency world. Scheduled for April, this halving will reduce the mining reward for Bitcoin by half, as per the cryptocurrency’s code. While this event has historically preceded substantial gains in Bitcoin’s value, it also presents challenges. The halving could force less profitable miners out of the market, potentially allowing more sustainable mining operations to increase their market share.

 


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